Despite falling gray market premiums, global market selloffs, rising rate fears and inflation concerns, LIC retains its charm.
The majority of market experts say that LIC is a long-term game and investors should bid for the issuance based on their funds and risk appetite. However, one should not bet on stakes to list only the winnings.
VK Vijayakumar, chief investment strategist at Geojit Financial Services, said listing gains are possible in LIC as the valuation is attractive. The medium-term outlook also looks good, he added.
“Many other stocks now look attractive after the correction. An important market trend is the preference for value stocks over growth stocks,” Vijaykumar said.
Even Ajit Mishra, vice president of research. Religare Broking supported the advice and added that the big issues are not for listing gains. You need to invest in good companies for the longer term and LIC is one of them.
“Investors should go all out, funds permitting, despite market pessimism as valuations favor the insurance giant,” he added.
The government values LIC at Rs 6 lakh crore, which is 1.12 times its intrinsic value (EV) of Rs 5.4 lakh crore. Embedded value is a measure of the consolidated shareholder value of an insurance company.
Santosh Meena, head of research at Swastika Investmart, said LIC’s valuations were lower than those of its listed peers. “Investors need to understand that insurance is a long-term business and this issue is just a long-term game.”
However, other experts are skeptical on the matter due to current market conditions and the company’s low profitability, which could hurt its appeal against its peers.
Analysts said the broader markets are going through a much-needed healthy correction and investors should look to buy the dips. However, the current cycle of correction is not over, the warning.
Some analysts are warning investors to be cautious on the issue of LICs. They say investors shouldn’t pull out all the stops, given the current market sentiment. One should subscribe to the question given their risk appetite.
Astha Jain, senior research analyst at Hem Securities, said the issue was receiving a good response and is expected to generate small gains in listings. However, investors should lower their expectations amid the ongoing correction.
“We suggest investors bid for LIC, but it’s time to beware of your risk appetite as market conditions are not as attractive as they once were.”
LIC is the largest insurance company in India. Previously, the government was expected to value the insurance giant at Rs 12-13 lakh crore, but global volatility weighed on earlier plans.
A fund manager who spoke on condition of anonymity said investors can only benefit from the LIC if the company is working on profitability.
“The government needs to sell more of its stake, which could be a daunting task if profitability does not improve,” he added. “However, if the numbers are favourable, the street might be willing to give it a higher valuation than its peers.”